Global Markets View - Nov 9, 2021
2-min read to stay updated on global markets and become better investors
US
* S&P 500 closed above 4,700 for the first time while Nasdaq ended flat near 16,000 after passage of a U.S. infrastructure spending bill, even as sliding Tesla shares weighed the indices down. Corporate earnings, strong hiring data and a Covid treatment breakthrough bolstered optimism. Energy, industrials, materials and financial shares were in demand on apparent optimism for the outlook for the economy after the U.S. Congress passed President Joe Biden's $1 trillion infrastructure spending bill. Volatility Index (VIX) rose 4.5% to 17.2
* Mining company Freeport-McMoRan, construction materials stock Vulcan and steel corporation Nucor were among the notable gainers on the S&P 500. Construction equipment manufacturer Caterpillar, heavy equipment producer Deere, and other infrastructure-related companies such United Rentals, Martin Marietta and Jacobs Engineering were amongst gainers. Indices were weighed down by Tesla Inc.’s 4.9% slump after Elon Musk asked his Twitter followers if he should sell 10% of his stake, to which they said yes. Cryptocurrency and blockchain-related stocks, including those of Coinbase Global, Riot Blockchain, Marathon Digital Holdings and MicroStrategy Inc rose sharply, as ether scaled new peaks and bitcoin neared a record high.
* The third-quarter reporting season has reached the final stretch, with 445 of the companies in the S&P 500 having reported. Of those, 81% have come in above analyst expectations. S&P 500 margins expanded by 70 bp more than expected and EPS growth is 38% yoy in 3Q. Despite lingering global supply chain disruptions and elevated inflation, companies have successfully navigated most margin headwinds by relying on pricing power.
* Federal Reserve Vice Chairman Richard Clarida repeated his view that the criteria for a rate hike could be met before the end of 2022. St. Louis Fed President James Bullard said that he foresees the central bank raising interest rates twice next year, and that a more rapid pace of interest-rate increases could be adopted if inflation runs hotter than expected. Markets are closely watching for signs about the reappointment of Powell, whose term as Fed boss expires in 2022, following reports that President Joe Biden met with the chairman and Fed Gov. Lael Brainard at the White House on Thursday.
* Fear over inflation and supply chain headwinds have been replaced by fear of missing out in the record-high rally. Robust demand and economic momentum continue to drive earnings growth. Coronavirus concerns have also dissipated amid vaccine developments and widespread inoculation rates. However, the pace of the latest gains may make it difficult for stocks to push higher without an additional catalyst.
* US 10-yr yield rose to 1.49%. Dollar Index fell 0.3% to 94. Brent crude rose 1% to $84.6 a barrel even as the U.S. said it may announce measures to ease oil and gasoline prices as soon as this week. Gold rose 0.5% to $1,826 as inflation is expected to remain high.
Europe
* The Stoxx 600 was little changed. Chemicals company Henkel and retailer H&M declined on inflation-related earnings concerns.
* European gas and power prices surged on signs Russia won’t deliver the boost in supplies President Vladimir Putin promised.
Asia
* In China, stocks rose after the Communist Party begun a meeting this week for the first time in more than a year. The gathering is expected to lay the ground for extending the term of President Xi Jinping, who has rattled markets with his “common prosperity” campaign to redistribute the nation’s wealth.
* China’s trade surplus expanded to a record $84.5 billion in October – above the prior month’s $66.8 billion and expectations of $64.0 billion. Robust Chinese exports reflect strong global demand for goods which surged as global economies are coming out of the pandemic.
India
* Benchmark indices recovered their losses intraday and closed at day's high on Monday, amid across the board buying. On the sectoral front, IT, consumer durables and realty gained focus while pharma and private bank stocks dragged. Open up trades continued to do well with Hotels, Theatres and retail outperforming. The broader markets too extended gains and the mid and small cap indices were up over a per cent.
Source: ABSLAMC Research